C. R. ASSOCIATES,KOTA vs. ITO, WD-1(1), KOTA, KOTA

ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 23-05-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2018-19 wherein the assessee has raised the following grounds of appeal. ‘’(1) Explanation to Section 36(1)(va) and 43B is inserted by Finance Act, 20221 w.e.f. 01-04-2021. The ld. CIT(A) has wrongly applied it with retrospective effect. Memorandum explaining the provisions in the Finance Bill 2021 clearly states at page no. 42 that ‘’These amendments will take effect from Ist April, 2021 and will 2 M/S. C.R. ASSOCIATES VS ITO, WARD 1(1), KOTA accordingly apply to the assessment year 2021-22 and subsequent assessment years. (2) That the ld. CIT(A) has also ignored the jurisdictional Punjab and Haryana High Court decision in favour of appellant and has also ignored the binding decision of Hon’ble SC in the case of CIT vs Alom Extrusion Ltd. (2009) 319 ITR 306 (SC), PCIT vs Rajasthan State Beverage Corpn. Ltd. (2017), 84 taxmann.com 173 (Raj). CIT vs Rajasthan State Ganganagar Sugar Mills Ltd. (2017), 88 taxmann.com 522 (Raj) [2019] 103taxmann.com 196b& (Jaipur Trib)/[2019] 69 ITR (T) 261 (Jaipur- (Trib)/[2019] 175 ITD 557 (Jaipur – Trib). Zuberi Engineering Company vs DCIT, Circle-2, Jaipur.

3. That on facts, in view of evidence on record and circumstances of the case, CPC (Central Processing Unit) has wrongly and erroneously made the addition of Rs.1,04,729/- in respect to ESI & PF payment u/s 154 whereas amount claimed on payment of ESI & PF if paid after due date under respective Act but before due date of filing of returns u/s 139 of Income Tax Act, same could not be disallowed u/s 43B or u/s 36(1)(va) of Income Tax Act.

2.1 None appeared on behalf of the assessee when the case was called out for hearing. Hence, the Bench decided to dispose off the appeal of the assessee based on the material available on record after hearing the ld. DR 2.2 Brief facts of the case are that the assessee has filed the return of income electronically declaring total income of Rs.3,28,440/- vide acknowledgement number 297392311190918 dated 19-09-2018. From the record, it is noted that this appeal has arisen before the ld. CIT(A) out of the rectification order finalized u/s 154 of the Act dated 16-09-2020 passed by the CPC, Bangalore for the A.Y. 2018- 3 M/S. C.R. ASSOCIATES VS ITO, WARD 1(1), KOTA 19 wherein the AO made the disallowance of Rs.1,04,729/- pertaining to the delayed payment of Employees Contribution to PF/ESI which was paid by the assessee after the due date under the ESI and PF Act. It is further noted from the record that the assessee in this context had stated that the AO erred in making addition of Rs.1,04,729/- without considering the application u/s 154 of the Act and also reply of Section 143(1)(a) of the Act. In first appeal, the ld. CIT(A) has confirmed the action of the AO by observing as under:- ‘’24……..Thus, the AO was well within the jurisdiction of the Act to disallow an incorrect claim apparent from the information in Form No. 3CD attached with the return of income. Accordingly, the addition by way of disallowance u/s 36(1)(va) is hereby confirmed. Appeal is dismissed.’’ 2.3 During the course of hearing, the Bench noted from the written submission filed by the ld. AR of the assessee that employees’ contribution towards PF and ESI collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act (PB page 2) and thus submitted that where such contribution has been deposited before the due date of filing of return of income then no disallowance u/s 36(1)(va) of the Act can be made. In support of this, the ld. AR relied on various case laws (supra).Through written submission, the ld. AR invited attention of the Bench to the Memorandum of Finance Bill. 2021 in which it is explicitly mentioned that these amendments 4 M/S. C.R. ASSOCIATES VS ITO, WARD 1(1), KOTA will take effect from Ist April, 2021 and will accordingly apply to the Assessment Year 2021-22 and subsequent years. Therefore, the disallowance confirmed by the ld. CIT(A) as to the issue of deposition of PF/ESI deserves to be deleted. 2.4 On the other hand, the ld. DR supported the order of the ld. CIT(A). 2.5 After hearing the ld. DR and perusing the written submissions as well as details submited by the ld. AR as to the deposition of ESI/PF contribution of the employees, the Bench finds that Employees Contribution towards PF/ESI has been paid before the due date of filing of return. The Bench also observed that the issue of late deposit of PF/ESI contribution by the assessee but before filing the due date of filing of the return, is covered by the decision of ITAT, Jaipur Bench dated 22- 02-2020 in the case of Pratap Technocrats Private Ltd. And another vs ADIT,CPC, Bengaluru (ITA 18/JP/2022, 33/JP/2022, 24,25, & 26/JP/2022 wherein ITAT has held as under:- ‘’20. By considering the totality of the facts and the judicial pronouncements, we are of the view that the amendment brought in the statute i.e. by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting explanation 2 is prospective and not retrospective. Hence, the amended provision of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee’s appeal is allowed.’’ 5 ITA NO. 263/JP/2022 M/S. C.R. ASSOCIATES VS ITO, WARD 1(1), KOTA Therefore, the Bench respectfully follows its judgement (supra) on the issue of PF/ESI and the order of the ld. CIT(A) is reversed. Thus the appeal of the assessee is allowed.

In the result, the appeal filed by the assessee is allowed. 3.0 Order pronounced in the open court on 21 /09/2022.

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